Bounded learning by doing, inequality, and multi-sector growth: A middle-class perspective

Alain Desdoigts () and Fernando Jaramillo ()

Working papers from Red Investigadores de Economía

Abstract: This study presents a multisector model of middle-class-led economic growth, whereby, on the one hand, the middle class plays a key role in determining technical progress, while, on the other hand, both its size and income share are the result of past economic growth. Learn- ing by doing, which is assumed to be sector-speci c, bounded from above, and constrained by a minimum scale restriction, is the primary source of productivity gains. The emphasis is then placed on the entire income distribution, which a¤ects the composition of demand -span of goods consumed- and in turn, the speed and the extent of the learning process in the set of goods produced. The model exhibits an inverted-U relationship between inequality and economic growth, which re ects the following trade-o¤: An economy cannot learn both quickly and simultaneously in a wide range of sectors. It is constrained in this respect by its income/skill distribution and the size of its labor force, with consequences on growth-enhancing strategies by means of income redistributions.

Keywords: Learning by doing; Middle-class-led consumption; Inequality; Multi-sector growth; Income redistribution (search for similar items in EconPapers)
JEL-codes: D31 L16 O33 O40 (search for similar items in EconPapers)
Pages: 40
Date: 2018-07
New Economics Papers: this item is included in nep-pke
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Journal Article: Bounded Learning by Doing, Inequality, and Multi-Sector Growth: A Middle-Class Perspective (2020)
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